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Summary-Report on Economic Development in December 2009

The year-on-year rate of inflation in the euro area measured by the harmonized index of consumer prices reached 0.9% (in November 0.6%). In December, the euro exchange rate vis-à-vis the dollar depreciated. During its first meeting in 2010 the Governing Council of the ECB decided that the interest rate for the main refinancing transactions and the interest rate for overnight refinancing and overnight sterilisation transactions would remain unchanged at the levels of 1.00%, or 1.75% and 0.25%.

The economies of Hungary and the Czech Republic recorded an acceleration in their year-on-year increase in price level. Inflation in Poland has remained unchanged for the period of three months. The exchange rate of the Czech koruna depreciated during December while the Polish zloty and the Hungarian forint appreciated again at the end of the year. The exchange rates in the Czech Republic and Hungary have changed. Česká národní banka decided on decreasing its two-week repo rate by 0.25 of a percentage point and at the same time left the discount rate unchanged. Similarly, Magyar Nemzeti Bank reduced its key interest rate by 0.25 of a percentage point. Key interest rates in Poland remained unchanged.

The year-on-year inflation rate in Slovakia did not change in December when compared with the previous month and remained at the level of 0.0%. This development was influenced by contradictory development in energy prices, especially fuel prices (of which the year-on-year growth rate has accelerated) and in other components within the structure of inflation which slowed down its year-on-year pace of growth. In prices of industrial goods excluding energy, prices of short-term and medium-term consumption decreased. A negative growth rate of cost prices have mitigated, as the more marked decline in energy prices was offset by a slowdown in the year-on-year decrease in prices of industrial products.

The achieved current account balance in November compared with the previous month has increased, which was associated in particular with a lower trade surplus. In November, however, a positive trend of the year-on-year growth rate of exports was recorded reaching a positive figure for the first time since the beginning of 2009.

The growing external demand, supported by global incentives meant to alleviate the impact of crisis affected the increase in industrial production index. Its growth, however, was associated also with a base effect of a negative year-end development in 2008. At the same time, the month-on-month production only slightly increased. Indicators of economic development suggest the persistence of a positive trend in the near term. Construction production recorded a marked slowdown of the year-on-year decline in November, while the prevailing optimistic expectations of the construction activity in the December cyclical survey and a stabilized demand indicator suggest that the development in construction could gradually begin to follow the trend of revival in other sectors. Similarly, the receipts in selected sectors have jointly reached a significant mitigation of the negative year-on-year growth rate, primarily, owing to the slowdown in the year-on-year decline in receipts of industry. The overall economic sentiment indicator compared with the previous month increased in December. The development of indicator was positively affected by the increased confidence in all areas, especially in industry and services. The increase in optimism in industry was primarily influenced by growing expectations of industrial development production for the next three months. The consumer confidence increased also when assessing the expected financial situation of households, unemployment and assumed economic developments in Slovakia. Deterioration occurred in the estimation of expected household savings.

The average nominal wages in November compared with the same period last year did not change and real wages fell slightly on a year-on-year basis. In November, despite the high inter-year slump, the decline in employment for selected industries moderated in average. The year-on-year growth rate of employment declined mostly in the wholesale trade, restaurants, pubs and industry. Registered unemployment rate reached 12.4% in November and compared with the previous month remained unchanged.

The development of deposits in terms of sectoral breakdown was very similar in November both in non-financial corporations and households. The volume of short-term deposits in both sectors increased on a month-on-month basis with a parallel reduction in the volume of deposits with agreed maturity up to 2 years. A sharper decrease in household deposits with agreed maturity up to 2 years partly influenced an increase in long-term deposits of non-M3, which was associated with the end of deposits´ maturity opened before the introduction of the euro and also with a higher interest rates on longer-term deposits compared with short-term deposits. An increase in loans to households continued to grow while loans to non-financial corporations recorded a slight increase after two months of decline. Clients´ interest rates on loans to non-financial corporations remained unchanged in November, and loans to households mostly decreased. A slight decrease after three months of stagnation was seen in interest rates on loans for real estates within which the remuneration of bridging loans, mortgages and other loans to real estates declined. Interest rates of consumer credits have increased significantly which could be a result of higher household demand for loans for consumption and higher risk premiums. Interest rates on deposits of non-financial companies stagnated in November, while interest on household deposits had a slightly upward trend.

Jana Kováčová
Spokesperson of the NBS

National Bank of Slovakia
Communications Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2168,+421-2-5865 2168, +421-2-5787 2169, 421-2-5865 2169

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